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ACCA Strategic Professional · Advanced Financial Management · The role of the treasury function in multinationals

Which of the following is a recognised limitation of multilateral netting for a multinational group?

A key limitation is that some countries' exchange control rules prohibit or restrict netting, and settlement dates must be aligned across subsidiaries. Netting does not apply only to home currency, it reduces gross payments, and it usually depends on a central treasury or netting centre to operate.

  1. AIt can only be applied to transactions in the group's home currency
  2. BExchange control regulations in some countries may prohibit or restrict netting, and timing differences in settlement dates must be managedCorrect
  3. CIt increases the volume of gross intra-group payments
  4. DIt eliminates the need for a centralised treasury or netting centre

Explanation

Netting requires a common settlement date and is restricted by exchange controls in some jurisdictions. It is applied to foreign currency flows, reduces rather than increases gross payments, and normally relies on a central treasury or netting centre.

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